Personal Property Securities Reform

By Michael McGrath

Michael McGrath is an Associate Director at Mullane & Lindsay in Newcastle and specialises in our Commercial, Property & Estates Law Team.

The Personal Property Securities Act is due to commence in early 2012 (“PPSA”). The PPSA creates a national registration scheme for security interests in personal property and replaces the current various ad hoc registers of the various states, territories and commonwealth. The aim of the PPSA is to improve the ability of individuals and businesses to use all their assets to raise capital by streamlining the process of registering security interests in personal property.

Personal property is defined in the PPSA as any form of property other than land. It includes tangibles such as machinery, crops and livestock and intangibles such as licences, intellectual property and contractual rights. A personal property security is defined in the PPSA as an interest in personal property which secures payment or the performance of an obligation. A common example of a personal property security would be a personal loan secured over a motor vehicle (and therefore will replace the REVS register in NSW). Other examples include fixed and floating charges, chattel mortgages, bills of sale, finance leases, consignment (or retention of title agreements) and factoring of book debts.

A secured party is a person, company or other entity that has a security interest over the grantors personal property. A secured party can make a registration on the PPS register to protect their priority over the secured personal property of the grantor. Through the registration of their security interest, the secured party “perfects” their secured interest and takes priority over later registered security interests in the same personal property and it is therefore important for anyone who is taking a security interest over personal property to search the PPS register to ensure there are no pre-existing security interests which would take priority and to promptly register their own security interest so priority is not lost to a later security interest.

Likewise, it is also for anyone looking at buying on investing in personal property to search the PPS register to ensure such property does not have a security interest registered over it which may take priority. For example, if you buy a car with money owing on it, the car could be repossessed by the person owed the money if their security interest has been registered.

Michael McGrath is a Associate Director at Mullane & Lindsay, and practises extensively in Commercial, Property & Estates Law. If you require any assistance in these areas please contact Michael McGrath or contact our Newcastle office.